Search form

You are here

Property, Georgism, and the Safety Net

Many thanks to Matt for his thoughtful replies. I want to start by addressing/dodging questions about property rights. The beginning of Matt’s most recent post is reminiscent of some earlier remarks by Kevin Vallier. My response to Matt on the subject of property rights is therefore similar to my earlier response to Kevin: I am not giving a theory of property, mainly because

1. It is reasonable to take property rights for granted here, since there is hardly any thinker who rejects them (and certainly not either Matt or myself);
2. If there were no property rights, taxation would be impermissible anyway – not because taxpayers would have rights to their pretax incomes, but because the state would fail to have any property rights over the taxes that they claim citizens owe them.

I suspect that some readers misunderstand my central argument because they confuse me with other libertarians. My central line of thought does not start out like this: “My God, coercion is so awful, how can it ever be justified?” My central line of thought starts out like this: “Wow, we seem to have much more permissive attitudes toward the state than we have toward any other agent. How can that be justified?” To point out that coercion is needed to enforce property rights really does not show an interesting parallel between belief in property rights and belief in authority, because in endorsing property rights, we are not setting up some agent with special entitlements and moral exemptions that apply to no other agent. Those who endorse political authority must answer “what is so special about this one agent?” Those who endorse property rights face no such question.

That being said, Matt has nevertheless articulated what sounds to me like a libertarian moral argument for some sort of wealth redistribution, which is not undermined by anything I have said so far.

Actually, there seem to be two distinct arguments in this vicinity: first, there is the argument that some individuals may have been rendered worse off overall as a result of our system of property rights than they would have been … under some alternative scenario (I’m not sure what the relevant alternative is – the scenario in which those individuals got to appropriate everything? the scenario in which no one ever appropriated anything?) However, it seems that Matt and I agree that only very few individuals would satisfy this description (on any plausible interpretation of the relevant alternative scenario). So I don’t see how this argument could justify anything like Matt’s basic income proposal, which, as I understood it, is supposed to provide a basic income to everyone.

Second, however, there is the argument that I take to be Henry George’s: no one really has any better claim on any bit of natural resources (including especially land) than anyone else. Therefore, everyone is entitled to benefit equally from the value of natural resources (but only of natural resources; value contributed by human activity belongs by default to those who perform the labor). Therefore, it is appropriate to distribute to everyone a sort of basic income: roughly, each person should receive the nth part of the total natural resource rents of the world, where n is the number of people in the world. This is assuming that we can separate the portion of the total economic product that is due to natural resource rents from the portion that is due to other causes.

As a piece of moral reasoning, I have some sympathy with this argument. However, I think it just does not matter very much, because I think the amount of income that a proper Georgist scheme would provide would be minimal – far too small to satisfy the advocates of a social safety net. The reason is that I think the amount of economic value that is attributable to natural resource rents is tiny. Unfortunately, I am not in a position to provide any serious estimate of these rents. Instead, I will just note some ways in which the value of these rents has often been overestimated; I hope that then most readers will agree that a just estimate would be quite small.

Here is a very simple way of overestimating natural resource values: look at the price of some “natural resource” on the commodities exchanges. For example, gold costs $1300 an ounce. But this is the price of the resource after all the work of extracting and purifying it has been done.

Another way of overestimating natural resource values is to consider the value of a parcel of land (with resource-extraction rights included) that is known to have some interesting resource underground, such as oil or gold. Such land can indeed be quite valuable, even before anything has been built on it. However, discovering the location of such interesting resources requires surveying, which is a form of labor (see Caplan and Gochenour’s discussion). To truly capture the unimproved value of land, one must consider the economic value of the land before any surveying has been done, and thus before it is known whether that land has any interesting resources under the ground.

A third way of overestimating natural resource values (specifically, land values) is to consider the value of an empty plot of land in some developed area. For instance, land in some parts of New York City is worth $800 per square foot before anything is built on it. However, almost all of this value is due to human activity, especially the activity of other people who live and have lived in New York. This is shown by the fact that land (with no fewer natural resources) in completely undeveloped areas has much lower value. You might be able to buy a plot of wilderness land in Montana for 8 cents per square foot. If we apply the Georgist rationale strictly, the 8 cents is more relevant than the $800. But even the 8 cents is an overestimate, since some of that value is probably due to human activities (if the rest of the continent were devoid of human occupation, the same plot of land would probably have even lower economic value).

In light of these reflections, I do not think that anyone should expect a livable salary from their fair share of the world’s natural resource rents.

Also from This Issue

Matt Zwolinski argues that a basic income guarantee (BIG) could very easily do better than our current welfare state by many different criteria. It would be far more efficient. It would be less subject to rent-seeking. It would be easily accessible by the poor, and its benefits would flow to them rather than to the middle class. Although there are many libertarian objections to a BIG, Zwolinski nonetheless argues that when faced with a choice between a BIG and the status quo, libertarians should be open to making the change.

Michael Huemer argues that while a basic income guarantee might be better than the status quo, this amounts to some rather faint praise. A basic income guarantee would necessarily violate some people’s rights, while a fully legitimate government must never violate anyone’s rights. The problem of political authority will likely remain a barrier to all similar proposals, even if we may happen to find this problem’s full implications troubling.

Jim Manzi doubts that a basic income guarantee would emerge from our political process while still bearing its purportedly beneficial features. Compromises would proliferate, as would paternalistic controls. The interests of the bureaucracy would assert themselves, and the temptation to make exceptions would prove overwhelming to the electorate. Moreover, when a basic income guarantee has been tried in practice, the result has consistently been a withdrawal of participants’ labor. Scaled to an entire society, the result of such a withdrawal may be dire.

Robert H. Frank agrees with Matt Zwolinski that a basic income guarantee would achieve the welfare state’s goals more effectively than our current patchwork of programs. But he argues that a basic income guarantee sufficient to end poverty would spawn massive taxpayer resentment. Incentives to work would be undermined both for recipients and for those whose tax dollars funded them. Frank recommends a combination program that would include a significantly smaller cash grant and a standing offer of public employment for any who desired it. Frank defends taxation against libertarian objections and offers several additional taxes that he believes should be implemented. He argues that these should help pay for the expensive programs here being considered.

The Cato Institute’s Michael D. Tanner examines the Basic Income Guarantee and finds that its simplicity wouldn’t survive the political process. Difficulties abound, arising both from practical politics and from the realities of our current welfare expenditures. Tanner recommends consolidating our welfare system and simplifying it, but he does not endorse a Basic Income Guarantee.

Economist Ed Dolan shares some of his findings on the Basic Income Guarantee. He finds that work disincentives will indeed exist under a BIG, and yet these may be smaller than the work disincentives we already experience owing to the welfare state as it now exists. Libertarians should not be tempted by the so-called “gospel of work,” he says; libertarianism, rather, is about the gospel of freedom of choice.

Disclaimer

Cato Unbound is a forum for the discussion of diverse and often controversial ideas and opinions. The views expressed on the website belong to their authors alone and do not necessarily reflect the views of the staff or supporters of the Cato Institute.